DigitalOcean Acquires Cloudways Web Hosting for $350M

Cloud services provider DigitalOcean is growing its portfolio with the acquisition of privately held managed hosting provider Cloudways.

DigitalOcean is paying $350 million for Cloudways, which was founded in 2012 and for the past decade has focused on supporting small and midsize businesses (SMBs). Cloudways claims to have more than 75,000 customers and hosts over 570,000 websites.

DigitalOcean also has a strong focus on SMBs, as it continues to position itself as an alternative cloud provider to the Big Three providers — Amazon Web Services (AWS), Google Cloud Platform, and Microsoft Azure. Since its IPO in March 2021, DigitalOcean has grown its business with a model for scaling alternative cloud growth.

"Our business is focused on SMB cloud needs," Yancey Spruill, CEO of DigitalOcean, told ITPro Today. "It's clear that some small businesses want to manage their own infrastructure and others want or need someone to do that for them. Cloudways fills a specific gap in our product portfolio today."

The Cloudways team has built a very financially attractive business, according to Spruill. He noted that the Cloudways team was considering strategic alternatives and has been a longtime and trusted partner, so the timing for the acquisition felt right for all those reasons.

Related:Choosing an Alternative Cloud Provider Over One of the Big Three

How Cloudways Fits into DigitalOcean's Cloud Portfolio

Cloudways has a strong and loyal following of customers, which DigitalOcean is looking to continue to grow.

Spruill said that Cloudways will remain as a standalone business unit under DigitalOcean's chief operating officer, Jeff Guy. Aaqib Gadit, Cloudways' co-founder and CEO, will remain at the company, executing on Cloudways' and DigitalOcean's vision to serve SMBs. DigitalOcean is excited to bring in the Cloudways team, Spruill said, adding that the company will be adding team members in some key areas and will also leverage DigitalOcean's larger footprint to bolster some areas.

"With the acquisition of Cloudways, we're offering a much more complete solution and a new level of simplicity for builders," Spruill said. "Some SMBs don't want to manage their own infrastructure or DevOps. This will allow us to reach those customers directly through Cloudways' simplified platform."

The Growing Cloud Market for SMBs

DigitalOcean's focus is on growing the SMB market.

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There are more than 14 million new SMBs each year, and they make up half of the GDP in almost every country, according to Spruill. Additionally, the cloud market itself is growing 27% year over year and is currently valued at $70 billion, he said.

"Capturing this market depends on our ability to create easier pathways to success for a wider range of businesses and developers," Spruill said. "To us, this means getting them launched faster and supporting them through every stage of their growth."

The Cloudways acquisition comes just a few weeks after DigitalOcean reported its second-quarter fiscal 2022 financial results on Aug. 8. For the quarter, DigitalOcean reported revenue of $133.9 million for a 29% year-over-year gain.